How Late Payments affect your Credit Score

Payment history accounts for 35% of your credit score. A late payment is very damaging to your credit score and should be avoided at all costs.

Late payments, especially in this current economy, cannot be always be avoided. Here is what you should know about late payments.

Recent Late Payments
The more recent a late payment, the more damaging it will be to your credit scores. Older late payments are less damaging, especially if it is an isolated incident. A current late payment can drop your credit score by as much as 80 points, temporarily. If you do not routinely pay late, the damage should not be long term to your credit score.

Credit Scoring Models and Late Payments
Although credit scoring is complex, most credit scoring models involve predicting whether a consumer will default on an account 90 days or worse. An interesting aspect of the risk scoring model seems to be the amount of a default is not important, it is the default itself.

In other words whether you default $500.00 on an account or $5,000 on account is irrelevant. The fact that the account went into default is the credit score killer.

30 Day Late Payment
A 30 day late payment is not as damaging as a 90 day late payment. Older 30 day late payments which were isolated incidents are not going to adversely affect your credit score. However, if the 30 day late payment is reporting as currently 30 days late, it will damage late occurrence will not be long-term damage to your credit score.

60 Day Late Payment
A 60 day late payment that is reporting as currently late will tremendously damage your credit. However, once it is paid and if it is not a habitual pattern, your credit score will not damaged long term.

90 Day Late Payment
90 day late payment is the credit score killer. As mentioned above, 90 day lates are used in the credit scoring model as a predictor of high risk and whether you will default on all your obligations. This negative entry can greatly damage your scores up to 7 years and it does not matter if the 90 day late is current or older.

Credit scoring models determine once you go 90 days late on an obligation, current or older, you are likely to repeat that behavior compared to a consumer who has never been 90 days late. 90 day late payments are detrimental to your credit score.

120 Day Late Payments
At this point the account is in danger of being charged-off, transferred or sold to a collection agency. As you know, charge-offs and collection accounts plummet your credit scores. You must work diligently to avoid this or dispute these entries until they are deleted.

Learn how to dispute late payments on your own or allow a professional repair your credit Lexington Law helped clients remove 1,297,226 negative items in 2010 alone which included late payments. Call for a free credit repair consultation today (877) 587-4574.